Connie Hedegaard, Member of the Commission. − Mr President, why did the Commission propose the clarification of the EU Emissions Trading System directive in the first place? The basic idea of the EU ETS is very simple: to make the right to pollute our climate a scarce resource that has a price, so that companies think more about how to reduce emissions and integrate the cost of doing so into their investment and operational decisions.

Because emissions rights can be traded, they will tend to end up with those businesses and factories that need them most for their activities and, therefore, are ready to pay the price if they need more than what they have received for free. Do not forget that a lot of allowances are given out for free.

This approach is cost-effective for society and was therefore designed to be a key tool in the EU’s efforts to meet its climate objectives. It was also meant to implement the ‘polluter pays’ principle enshrined in the Treaty and to give companies in the EU’s internal market a level playing field. A level playing field, moreover, where you cannot beat your competitor simply by polluting more; where profitability is not just based on pushing the bill onto future generations, and where innovation in less-polluting processes and technologies is rewarded and pays off for companies, also in the short term.

Unfortunately, the system is not currently meeting all of these expectations, and there is one overriding reason for that: the economic crisis. The crisis has caused a fall in industrial production in the EU and thus in demand for allowances. This has resulted in the build-up of a huge, unexpected surplus of allowances that undermines the proper functioning of the system which, as I said, was designed to work through scarcity. In short, the protracted crisis has dramatically affected the EU ETS – just as it has affected so many other areas of economic activity in Europe. Just as policy-makers and legislators in the past few years have been busy responding to the crisis and addressing its many negative impacts on our economy, so it is time to address the impacts it has on the European ETS.

I know some of you argue that the ETS is a market and that we should, therefore, leave it alone. But in the case of a politically-created market set up through legislative action, such as the carbon market, policy-makers and legislators arguably have an even greater responsibility to act than in other markets if the assumptions on which their legislation was based have, meanwhile, fundamentally changed.

May I remind you once again of the point that we have just heard Mr Groote concede, that it was actually this Parliament that, in conjunction with the Energy Efficiency Directive, asked the Commission to tackle this situation? That is what we have been responding to, and I think that this Parliament also has a responsibility now.

That is why the Commission has proposed clarifying the EU ETS Directive and the backloading of the sale of 900 million allowances to 2019 and 2020 as a short-term measure to avoid things getting even worse while we prepare for more lasting solutions. And that is why the Commission has also put up for discussion a shortlist of options for structural measures that could provide a solution to the surplus in the medium term.

But I wish to stress that backloading in itself – which is what we are discussing today – will have no effect whatsoever on the amount of free allowances given to our energy-intensive companies, or on the total amount of allowances put into circulation in the years 2013-2020, the third phase.

After this introduction I will briefly comment on three issues involving some of the more specific key concerns that I know some of you have raised in the discussions.

First, the concern that backloading would set a precedent for future intervention of the same nature. The Commission understands this concern, and I can therefore be very clear on this point. We have never had any desire or intention of repeating this kind of exercise in the future, and that is also why the relevant amendments in this regard proposed by the Committee on the Environment, Public Health and Food Safety (ENVI) would be acceptable to the Commission.

Secondly, as regards the concerns expressed about electricity prices and the risk of carbon leakage, the Commission has analysed the expected impact of backloading in an impact assessment, including – to the extent feasible – on individual sectors. The assessment shows clearly that the impacts of backloading are expected to remain well within those projected by past analysis. Let me stress this very clearly: backloading is expected to counteract any further fall in the carbon price in the short term, in other words to stop the bleeding. It will not bring the price – or the impact on the risk of carbon leakage – anywhere close to the levels expected and politically accepted before the crisis, when the legislation was adopted. Today the carbon price is around EUR 4. It was supposed at this time to be around EUR 30, so do not tell us that the crisis is not impacting on the price. Of course it is.

This means that, even with backloading, the impact of the crisis will still be reflected in a considerably lower carbon price than originally expected. According to those who are most into this market – you can see it in the press as late as today – they expect that you will see a very limited increase in the price if this Parliament adopts this proposal tomorrow.

This brings me to my last point. The market urgently needs Parliament as well as the Council to approve the proposal. I hope that you will do so tomorrow, because the sooner we get clarity on backloading the better, so that we can focus on what really matters – for instance, the 2030 framework – and deliver the predictability that our industries also need for the medium and longer term.

The backdrop to all this is that climate change is getting worse. The EU’s dependency on imported fossil fuels is increasing and so is, therefore, the bill we have to pay for our energy. This is not only bad for the climate, it is also bad for our economy, our competitiveness and our jobs.

Let me finally stress one particular aspect that is at stake and which should be of particular concern to Members of this Parliament and European policymakers.

To a large extent, backloading is the decision about whether we continue to regulate power generation and industry at European level or whether we act as bystanders witnessing an increasing fragmentation of the regulatory landscape and the internal market. I appeal to you, as the European Parliament, to support the European ETS as a common European tool. The alternative to doing this is not that we then just have very cheap prices and then nothing else happens. No, the alternative to securing the European ETS is a patchwork of 27 different national regulatory systems.

It cannot be in the interest of the European Parliament to go back to renationalised climate and energy policies when one of the successes you have been instrumental in achieving is a Europeanised climate and energy policy. I really hope that those of you who are still in doubt will bear this in mind tomorrow. That is the real alternative; that is why we need the backloading done, and we need it to be carried through tomorrow.

Dan Jørgensen (S&D), blue-card answer. – Mr President, I think that is a very reasonable question. Yes, of course, we cannot only use market-based instruments. I think we should also use other instruments, such as regulation for instance.

We have just adopted an energy efficiency directive that will definitely also point us in the right direction. But because this is a huge, massive problem, there needs to be a fundamental change in the way we consume and produce energy. We need to use all the policy tools that we have, and one of the most important ones is the ETS system.

If you are referring to a carbon tax as a possible alternative, there are many reasons why that might be an even better solution, but it is just not very plausible. So we need to use what we have now, and that is the ETS system.

Chris Davies, on behalf of the ALDE Group. – Mr President, we agreed some ten years ago that the way to stimulate low-carbon investment was to put a price on carbon. We introduced the Emissions Trading System because it was seen as the means by which industry could achieve carbon reduction goals at the least possible cost and in the most flexible manner. But, from the very moment it was introduced, we were ‘learning by doing’.

That is how the Commission introduced this in the first place. Mistakes have been made. It is true that the price of carbon is down because of the economic downturn, but it is also down because mistakes have been made in the structure of the scheme, and those mistakes need to be corrected. At the moment we are in a position where Germany and other countries are actually investing in unabated coal-fired power stations – lignite power stations, the dirtiest of the lot – and industry, especially the generators, are asking us to give them a clear signal about the pattern of investment in the future.

We look forward to structural reforms. We look forward to the Commission bringing forward proposals to implement what this Parliament has called for by a very large majority, which is the achievement of a 40% CO2 reduction by 2030. In the meantime we have this measure – a sticking plaster, some would say; but if you are bleeding you put on a sticking plaster on the way to the hospital. It is necessary to take this sort of action.

Mr President, I just want to use a few seconds of my time to appeal to some of my Conservative colleagues from the United Kingdom, because collectively we have gone further than the Commission. We have introduced a ‘carbon price floor’ in order to stimulate these low-carbon investments and give an incentive to renewables and to the nuclear power industry. Our price is set much higher now than it would be even if back-loading is introduced.

It has got to be in the interests of British industry to make sure there is a level playing field, and I appeal to British Conservatives MPs – not simply for the sake of coalition policy in my country but for the sake of our industry – to support this measure and achieve a level playing field to promote low-carbon investment across the whole of the European Union.

Bas Eickhout, on behalf of the Verts/ALE Group. – Mr President, my question to my conservative colleagues would be: what are we voting for today? What are we voting for?

We are not voting about the future of ETS, we are simply voting about saving the ETS. That is what we are voting about.

Is this against industry? The same industry that got allowances for nothing until now? Industry that is still getting 85% of its allowances for free in the third phase that started this year? Are we sacking them? No, we are not. Did you read the Financial Times this morning, where industry is asking to support backloading – industries like Shell, Eon and EDF. These are not my usual allies, I must say, but I for once find myself in their gang.

Why is that? Because they see that their innovation is being killed in Europe. They see that coal-fired power plants are now the cheapest option for energy, and that is increasing in Europe. That is the problem we are having, and that is what we are talking about. We are talking about buying time. We are talking about a backloading proposal that is only buying time to have a discussion for a real fundamental reform of ETS.

To those who are asking for a real fundamental reform of ETS, I agree, but we need time for that. The carbon price will collapse to one euro if we vote against the backloading proposal. Then there will be no carbon price. Then we will have killed the ETS.

If that is your purpose, be honest about it and say so.

What we are doing now is buying time for the debate. Let us have a discussion on the fundamental reform of ETS. I am in favour; Australia is in favour because they want to link with us; China is looking at pilot projects, so they want to join us later on as well. So at least let us have a discussion, but we need time and backloading for that – so support it!

Dan Jørgensen (S&D), blue-card question. – I would like to ask you a question, Sir. You probably know how busy we are. We need to start making these changes within five to ten years. How can you even think that it is possible or feasible to have a carbon tax on the scale that you talk about within this time frame?

Godfrey Bloom (EFD). - Mr President, well what do we know about carbon dioxide? Not carbon – carbon dioxide is a different thing for those people in this Chamber who have not had the benefit of a formal education. They are different things. We know that carbon dioxide in the atmosphere always follows periods of global warming.

We know, do we not, that the hypothesis that man-made global warming was going to cause totally apocryphal boiling in 2050 now is completely nonsense. The hypothesis is dead in the water. It is facedown. There has been no statistically significant global warming now for over fifteen years. There is not a single independent scientific institution which does not acknowledge that fact.

So all this debate is a lot of nonsense, because it simply is not happening. And Commissioner, you say that the weather is getting worse and worse; that climate change is getting worse. Madam, where have you been? It has not been. Why are you in denial? You are in denial! If I may lapse into the vernacular of the loony Greenies and their fellow travellers on this complete money-making nonsense: denier! Denier!

(The speaker declined to answer blue-card questions from Mr Davies and Mr Jørgensen)

Connie Hedegaard, Member of the Commission. − Mr President, can I first say to Ms Sartori who, like a number of others, was concerned about the increase in electricity prices: I think it is very important here to put things in proportion. If you vote ‘yes’ to this, then the Commission’s impact assessment, the big operators in this market, and those who on a daily basis analyse the implications of what we do – such as Point Carbon and Bloomberg Energy Finance – all these specialists estimate that the maximum impact on the cost of CO2 per tonne would be a return to the prices of last September, October and November. That is what we are talking about, and that is why I say let us put things into proportion.

Ms Korhola and Ms Jordan and a number of others have said we should go for structural changes. Ms Jordan said we should devote our time to structural changes. I very much agree with this, but I just think that we have to see it like this: it is as if there is a patient who needs long-term matters to be tended to, but you firstly need to take care of more pressing matters. You need to do the first things first – and that is what backloading is trying to do. We will come back to these other things, but we need to do the first things first.

Mr Szymański mentioned energy-intensive sectors, such as cement, steel and chemicals. I should just like to remind you all that they get most of their allowances for free. If they are very technologically advanced, they will indeed get all of their allowances for free. I should just like to remind you how they were identified: on the basis of a carbon price that was seven times what it is today. It is based on a EUR 30 carbon price.

Mr Ferreira mentioned that we should also have a regulatory approach. Yes, of course. This is not the only instrument, but it is the key instrument. I happen to think that this is why it was no coincidence that this Parliament, when adopting regulatory measures like the Energy Efficiency Directive, asked the Commission to look at short-term implications for emissions trading. This was because you wanted us to avoid contradictory policies. I thought that this was wise at that time. I still believe that it was a sensible thing that you asked for. I think that almost any economist would say that it would be a failure of the market if the cost of emitting CO2 or the cost of polluting with CO2 were as low as it is now.

It was Mr Gierek who asked why they were doing this and who has been discussing it. Well, we have been asked to do it by you yourselves – the European Parliament. However, it was also discussed at an informal Environmental Council last year in April, so of course we also had the backing of Member States to come forward and address this.

To Ms Kolarska-Bobińska who asked whether we could be sure that this would be done just once, I think that I have already addressed that matter in my first speech. Of course, if this is part of the legislative measure we are taking, this is a guarantee. It could never be changed unless we came back to it. However, I have been very clear on this matter, including to the different groups. This is an extraordinary thing and not something that the Commission takes lightly, so I see it very much as something we do once only, as I stated in my first comment.

I would just like to say one thing: when you listen to this debate, you would think that we are already discussing the structural measures. However, I should like to remind you that all allowances stay in the system. It is not about removing allowances; that is for another discussion. This is only about when to auction allowances and in what quantities. However, we are trying to stop short-term overflowing in a market which is already overflowing and over-supplied. So that is basically what it is about.

My final point: Holger Krahmer said that the rest of the world is not following us. Well, that is not actually true when it comes to emissions trading. Here, the rest of the world – Korea, China and Australia, to mention but a few – is actually starting to follow the European Union’s example. I think it is quite interesting for this debate to note that, last week, China announced that it would come up with a proposal next month for a nationwide emissions trading scheme.

Would it not look just a bit foolish if Europe did not get it right with its own emissions trading scheme when we have actually now managed to get some of our very big competitors to adopt or start adopting a market-based system? So this is also a test. The world is watching what we are doing; this is actually one of the areas where we are leading the world.

Mr President, my very last comment is that I understand that for those of you who think that we do not have a climate problem or who have always been against the market-based system, of course it makes sense to vote ‘no’ tomorrow. However, all of us who ultimately want this system, with its inherent challenges and the market-based principle guiding it, must be careful to get it right tomorrow.

It is very interesting to discuss structural measures, but that takes time. Europe needs innovation now. Our competitors are moving, and they are moving fast. The call that we get from investors is this: please ensure that we get a stronger price signal for the shorter term, and then we would be ready to invest. I do not think Europe can afford to reject this. I still very much hope that this Parliament will deliver on a process that they themselves initiated in recent months.

Kriton Arsenis (S&D). - Mr President, I have been told that the English interpretation when I was speaking gave completely the opposite message – that I am proposing that people should vote against back-loading.

Of course this is not the case. I will urge the interpreters to really help us use our mother language and to provide proper interpretation. It may be that some things are not interpreted perfectly but they should not give completely the opposite message.